Disclosing Your Finances: Should you publicly publish your finances?

1. Officers and directors owe a fiduciary duty to their companies to perform their duties in the best interests of the company and its shareholders. Divulging company confidential information such as finances easily could be construed as a breach of such duties. Thus, in any company having shareholders besides the founders, public disclosure is a step to be taken only with caution. Whatever is happy and upbeat today might be otherwise tomorrow and shareholders may be only too keen to second-guess management if they think some disclosure ultimately left the company vulnerable (e.g., by helping a competitor).

2. You can't ultimately raise money for your company without making disclosure of financial information to prospective investors and a company would, in my view, have potential liability risks from legacy public disclosures that might have been made before the funding itself. What if such disclosures were inaccurate, as they would be if tainted by puffing or by any other depiction of the company's situation that appeared to be accurate on the surface but was in fact misleading. In such a case, what is to prevent an investor from claiming to have relied in a material way on such information to his detriment?

There may be other legal risks as well. There certainly are business risks: giving competitors useful information on where to target their resources based on your numbers; giving adversaries in a lawsuit added leverage in their settlement negotiations with your company; giving potential vultures ammunition for when to close in for the kill in an acquisition (e.g., you disclose "happy numbers" in a couple of good years and then go silent when you get overextended as a company and become vulnerable).

In general, one of the great advantages of being a closely-held company is the privilege of keeping the financial information within a very tight-knit group inside the company. To give that up gratuitously will in most cases be a big mistake. Of course, it may make sense for some founder groups to opt for such disclosure for some of the reasons cited in the post and in this thread. But this should be the rare exception and not the rule.

I never considered publishing financials until the dot-com-crash when so many companies were going under, we started getting daily emails from our customers asking, "Are you guys going to be around? Everything OK?"

Then I started publishing the info once or twice a year to show that everything was healthy and fine:

http://cdbaby.org/stories/02/06/04/5349389.html

http://cdbaby.org/stories/03/03/11/2873136.html

http://cdbaby.org/stories/03/08/12/6186390.html

Many customers told me that's why they chose to do business with us. Because we were so wide-open with our numbers.

At some point, these numbers are going to come to light with potential investors. If your numbers aren't great, not disclosing them might earn you audience with more investors, but ultimately you'd be wasting time that would be better spent improving your offering.

Perhaps it's better to let them disqualify themselves.

You can bet that investors will do this, as will interested competitors and even larger companies you do business with may well dig them up.

Posting figures on a blog is more public, you're drawing attention to them, but given that the data is available anyway, it might be better to reveal them on your blog.

(Of course, accounts don't get filed until after the first year...but then you would only be publishing the last financial year's stats.)

I don't get that. Does he mean that those investors will not find out in due course what your turnover is? Surely that would be a part of any - even preliminary - talks.

And if it is because VCs wouldn't want to be associated with such small companies then it might hold some water, but not a whole lot in my experience.

What is more important is that if you are successful in some niche that you don't want to be too lippy about it simply because you are waking up a bunch of would-be competitors. That's mentioned too, and I think that is one of the only really valid reasons for holding your cards close to your chest.

But even then, looking at a company from the outside in and having some stats to work with you can usually get within the ballpark of what a company is making.

Also, in many countries you do a public filing of what you are making anyway, usually with the local equivalent of the chambers of commerce. Anybody so inclined would be able to find out in a heartbeat.

The ground rule to me seems to be don't blab but act as if everybody will know it anyway.

"Suffice it to say that I don't think that the press you're going to receive outside the entrepreneurial community is enough to justify exposing your finances to the public."

I believe the opposite, most people (outside of tech) do not know much about products in tech, so they often come to people in tech for recommendations on everything from cell phones, to computers, to websites for fun / etc.

The same way you might ask a girl what flowers would be nice to get for your mom.

Recommendations exist in the real world & I personally think that putting yourself in front of a group of influencers (like the people here on HN) is a great way to gain word of mouth marketing.